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What about muni bond funds?
#1
Hi all,

First post on the forum outside the Introduce Yourself section; thought I'd kick things off by asking about municipal bond funds.  I've been poking around the site looking at the stock recommendations and the My Portfolio section and, unless I just missed it, I haven't noticed anyone taking an interest in these.  I feel that the tax-free dividends make them worth a look.  Thoughts?
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#2
Welcome!

In general at a time when interest rates are close to zero, anything with the word "bond" in it just makes very little sense. It's just not worth it to put your money in a bond fund if you can pick up the super high quality dividend aristrocrat of you choosing for the same yield, and get annual dividend increases as well as probable price appreciation to go with it.

I can't comment on the tax free status as I'm not too familiar with your tax system, however in most cases it's best to look at where you can get the risk/reward that you're looking for and then figuring out how to do that while paying as little taxes as possible.
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#3
The yields on munis aren't terrible compared to other bonds. The problem is some day interest rates will rise (though it will likely be years). Any bond fund will someday get crushed unless if it is EXTREMELY short in duration). I have a little TLT, very little. Mostly because I can sell puts against it. I don't think I am comfortable with anymore than 5% of my assets in bonds. That's even pushing it. Bonds make little sense to me right now.
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#4
Makes sense. I don't have any bond funds at the moment either, although in the past I've had PHYAX (current yield 4.6%) and some that are no longer around. Good point about interest rates rising crushing bonds; hadn't thought of that. TLT - I've never done anything with treasuries.

Maybe when I'm actually living off the dividends I'll turn to municipal bond funds if I'm making so much that it helps keep me in a lower tax bracket. But while I'm in the build up phase, I agree bonds don't cut it. From what I can tell so far, most of the participants of this site are also in the build-up phase; it would be interesting to hear from people actually living the dream.
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#5
While not munis, strategy # 2 is a BIIIG part of what I do.

https://medium.com/@martinschwoerer/etf-...d6d51a3e32
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#6
(10-10-2020, 08:56 AM)ken-do-nim Wrote: Makes sense.  I don't have any bond funds at the moment either, although in the past I've had PHYAX (current yield 4.6%) and some that are no longer around.  Good point about interest rates rising crushing bonds; hadn't thought of that.  TLT - I've never done anything with treasuries.  

Maybe when I'm actually living off the dividends I'll turn to municipal bond funds if I'm making so much that it helps keep me in a lower tax bracket.  But while I'm in the build up phase, I agree bonds don't cut it.  From what I can tell so far, most of the participants of this site are also in the build-up phase; it would be interesting to hear from people actually living the dream.
Pleased you are participating here.  Respond to any of these random thoughts.  

-We sound like we have some common thoughts.   I "war gamed" my financial plan from about age 25.  The plan changed some over the years but I mostly made my goal.  Hoped to retire at age 53 and do some bucket list stuff, and I didn't even know what would be on my bucket list so long ago lol.  I did take off three years from working at age 53, knowing I couldn't ride it out completely because I am too young to draw my pensions, or IRAs without penalty. Now I work part-time for a few years so I can help my young adult daughter start life.  I know how good it will be in two years when I retire for real so living the dream well enough.  Fully retired at age 60 if I choose to be, and already enjoyed three years of fun stuff like Alaskan fly fishing adventures.  I'm calling that a win.  I feel fortunate compared to most of my relatives and friends. They did enjoy a helluva lot more new cars and other luxuries while I was investing though.  I lived comfortable but conservatively, always planning for my family's future.

-Reality is you need a LOT of bonds or dividends  to live completely off income for now.   Like $2M in capital.  I'm not there in liquid assets.  I'll have other income streams.  Pensions, real estate I sold on contract etc.  

-Regarding bonds... I had planned to buy a lot of them by now.  Things change.  I am not anti-bond for sure, but go look at 1yr 3yr and 10 yr returns on longer term bond funds, the only chance for a decent yield now.  Notice the long-term bonds just had an awesome year?  I missed that bus.  It happened because interest rates fell 2-3% suddenly.  That rubber band snaps both ways.  Buy now and you'll get torched if some normalcy in interest rates is restored.  Maybe it won't happen but I doubt it.  Lose 20% of your capital on a position that only yields 3% if you are lucky?  No thanks.  I'll just buy shares of a conservative stock on the next hard dip and sleep better.                       

-I don't necessarily recommend TLT to anyone.  It's just a place I park some money. short term.  Yield is weak and it runs opposite the stock market usually.  A bit of a hedge while I look for the next stock opportunities. 

-Best advice I probably have for you now is diversify and EDUCATE yourself. I paid some dues due to bad decisins and the education is saving me now. I know how to minimize risk and still make money. Put yourself at risk of getting hurt on small income producing positions while you are young. Learn how things work now, before you are putting big bucks at risk when you can't afford to lose.  You may notice NilesMike and I participate in conservative option threads here.  We do it with what I consider big money but you can explore that with only $3-5K, which is precisely how I recommend anyone learn the ropes.  Income far exceeds normal dividends with less risk than just buying shares long.  Folks are intimidated but it doesn't have to be complicated, and it is truly more conservative than buying shares the simplest way.
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